Nonprofit organizations face pressure on all sides – funders, stakeholders, populations served, partnerships, etc. – so when crisis arises, the reaction is just as important as the predicament. “How boards respond to failings can be an important factor in whether the organization recovers or not (Mordaunt and Cornforth, 2004).
Organizational crisis can come about in degrees of severity, with origins internally or externally, and abruptly or over many years. It could arise from program mismanagement, fraud, conflict over use of money, disagreement about mission fulfillment, or poor community support. Crisis of any kind can fatally harm a nonprofit organization, especially a young or weak organization. Unlike for profit businesses, where there are many invested stakeholders, nonprofits often serve a population that requires much more output of energy and resources than will ever be paid back. This is nature of a nonprofit and accepted as a norm. The difference is, nonprofits rely heavily on volunteers, donations and support of a good cause. When crisis arises and trust is broken, or at least questioned, the inflow of these dependencies may become significantly reduced.
The board of directors is then responsible for reacting (if they weren’t the original problem) to the crises. For my board assessment project for PUAD 662, I experienced a board reaction to organizational financial crisis. The board and executive director formulated an ADHOC committee and action plan to combat the crisis. I also had the opportunity to look back into the history of the board and the organization. This was not the first crisis it has experienced. Looking back, the board has responded to emergencies with heavy involvement. Conversely, when the organization is in a time of stability there is significantly less board involvement. This was a perfect example of the “bi-loopial” diagram we discussed in class. It was very clear based on board involvement when the organization was stable and when it was not.
Mordaunt and Cornforth offer four phases in dealing with crisis. The first is recognition. This can be easy or very difficult if the crisis has been slow to come to a boiling point. After recognition is mobilization. In the case of the board I assessed, upon recognition of the financial disaster, they immediately formulated a special committee and action plan. The action plan is the third phase of crisis turnaround. This was an appropriate and timely response. Lastly comes transition. Because of changes made, there is a transitional period expected to allow people to adjust and move forward with new thinking (Mordaunt and Cornforth, 2004).
To conclude, board members play a vital role in response to crisis. Frequently, an organization’s turnaround or demise will depend solely on the ability of the board to react effectively to the crisis. The added energy, time, and stress to board members during this time could lead to burnout. It is not uncommon to have heavy board turnover after a crisis have been resolved.
Mordaunt, J., Cornforth, C. (2004). The role of board in the failure and turnaround of non-profit organizations. Public Money & Management, August, 227-234.